Wednesday, October 12, 2011

A new option if you want to invest in startups

Just a decade ago, if you wanted to invest in a startup you had to know someone. A lawyer, an accountant, a friend of friend would give you a referral to a company looking to raise money, or they’d invite you to invest with them. That’s how you got in the door.

You had to have a lot of money to play – often $50,000 or more. And the startups you’d see were from your geographical region. That traditional scenario left a lot of interested angel investors sitting on the sidelines.

Today, it’s a lot easier to become an angel investor, due to crowd funding, micro lending and investment sites like MicroVenture Marketplace Inc., which is opening doors to those looking to invest $1,000 to $10,000 or more.

The way to win at angel investing, of course, is to invest in the right startups. To get there, you need:

1) Good deal flow from which to spot potential winners.
2) The ability to invest in multiple deals so you gain experience.
3) A knack for spotting companies, and more importantly people, who will succeed.

Getting good deal flow is often the stumbling block for the average person looking to get started in angel investing. And it’s one of the reasons Bill Clark founded MicroVentures. He wanted to begin investing, but didn’t have access to good deals.

Like many others thinking about making angel investments, Clark wanted to invest smaller sums in more companies, allowing him to spread out his risk and also increase his changes of picking a winner. And he wanted access to great companies outside of the Austin area, which is his hometown.

More than a thousand investors have joined MicroVentures since Clark launched the investment service a year ago. The service matches companies seeking money with investors looking to invest anywhere from $1,000 to $10,000 or more.

MicroVenture helps investors learn about companies they may never have heard of, and to invest smaller sums, which is virtually unheard of with traditional investing.

MicroVentures also helps with the initial due diligence process by filtering start-ups and then providing documents to help investors conduct their own due diligence to help them make a final decision.